Should you save your miles for future travel or cash them out now?
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Reader Questions are answered twice a week by TPG Senior Points & Miles Contributor Ethan Steinberg.
While no one knows exactly when travel will begin to return to normal, experts around the world are predicting a slow recovery and that it will take several years for demand to return to pre-pandemic levels. Many award travelers are using this time to build up their account balances and plan for future trips, but some are considering cashing out their points and taking a different approach. TPG reader Cynthia is trying to decide which course is right for her …
I am totally committed to earning points, but is it wise to bank those miles at this point for international travel like we always have before or should we spend them on merchandise or domestic travel? Our balances are getting very high and we don’t expect to travel internationally until probably 2022.TPG READER CYNTHIA
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This is a personal decision to make, and what’s right for Cynthia might not be right for you or your family. Normally, we strongly recommend against hoarding points and miles. “Earn and burn” is the name of the game, because points and miles lose value over time. This doesn’t happen continuously and incrementally as it does with monetary inflation, but every time an airline devalues its award chart or adds new award booking restrictions, your miles are worth less.
It seems like Cynthia normally plays a pretty high-value points and miles game, especially if she saves up her points to use on longer international trips. I’m happy that she mentioned that she doesn’t plan to travel much until 2022, because time is the most important factor in making this decision. The longer you let your points and miles sit there without using them, the more susceptible they are to devaluations.
While most of us are itching to travel again, you need to be realistic with yourself about what your return to travel will look like. Maybe you won’t be traveling as much for work now, maybe you’ll be prioritizing shorter domestic trips over longer international ones, or even taking more road trips instead of flying.
I’ve always found earning points and miles to be the much easier side of the equation, especially compared to redeeming them. There will be plenty of options to earn more points in the coming years, including travel rewards credit card welcome offers and limited-time bonus categories. If Cynthia really doesn’t expect to travel for more than a year and a half, I see no problem with cashing out some of her points for cash or merchandise she can use today.
I would encourage her to leave six to nine months worth of points in her account so when she’s ready to start traveling again she’ll have some cushion to do so. I’d also encourage her to be strategic in her cashouts, trying to get at least one cent per bank point or frequent flyer mile whenever possible. Obviously she won’t be getting as good as value as if she were redeeming for flights, but there’s no reason to throw away all that value in a fire sale either.
The return to travel is going to be slow and gradual, and for some people it might be a few years before they’re traveling the way they did before the coronavirus hit. Hoarding points and miles is a bad idea as you’re exposed to the risk of devaluations. Still, I wouldn’t cash everything out either, but rather try and strike a balance where you keep some of your points and miles around but also redeem some for cash or gift cards you can use today.
Featured photo by Patrick Foto/Getty Images.
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